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Harper Report on competition law and policy - what you need to know

In this article we outline our preliminary views on the key competition law and policy recommendations made by the Harper Review on Tuesday, March 31 2015.

1. Misuse of market power – “effects” test

The law proposes to prohibit a corporation with substantial market power engaging in conduct that has the “purpose, effect or likely effect of substantially lessening competition”. There are no defences but the prohibition requires a weighing up of the pro-competitive and anti-competitive objectives and outcomes of the conduct.

What will this mean?

More ACCC investigations and prosecutions.

A need to assess the pro-competitive and anti-competitive outcomes of a proposed strategy or decision before implementation (over the short, medium and long term).

Increased economic input into decision-making.

2. Cartels

No major proposed changes other than to clarify that cartel conduct must involve actual or likely competitors (not “potential” competitors) and joint ventures (for production, supply, acquisition or marketing) and vertical supply agreements are only problematic if they substantially lessen competition.

What will this mean?

Cartels are still to be taken very seriously.

Genuine joint ventures and vertical supply agreements will continue to be subject to a competition test.

3. Mergers

There will be two ways to get your deal through – 1) the existing informal clearance process under the substantial lessening of competition test; and 2) a new formal authorisation process before the ACCC (with a right of review to the Australian Competition Tribunal) under a substantially lessening competition test ora public benefit test.

What will this mean?

A need to assess the competitive effects and public benefits of your merger to determine whether prospects of ACCC approval are greater under informal clearance or authorisation.

More merger authorisations where time is not of the essence (given the benefit of the review by the Tribunal).

4. New “concerted practices” prohibition

The law will prohibit “concerted practices” that have the purpose, effect or likely effect of substantially lessening competition. A “concerted practice” is not defined but it implies conduct between competitors that is coordinated or otherwise undertaken jointly in some manner. The new law is not intended to catch unilateral conduct or mere parallel conduct but it is targeted at catching conduct that is less than an “understanding”.

What will this mean?

Companies in concentrated industries where price matching and parallelism is common will be at greater risk.

Information sharing with competitors (either directly or via third party association or customer/supplier) will be at greater risk.

5. No more exclusive dealing or third line forcing

Exclusive dealing provisions (including third line forcing) will be abolished on the basis that such conduct will continue to be subject to the prohibitions of misuse of market power and general anti-competitive agreements.

What will this mean?

No real change for exclusive arrangements – a substantial lessening of competition test will still apply.

No more third line forcing notifications.

6. Resale Price Maintenance

RPM continues to be automatically illegal but you can “notify” the ACCC about RPM and obtain immunity if the public benefits outweigh the anti-competitive detriments.

What will this mean?

Companies may consider RPM as a viable strategy if the public benefits outweigh the anti-competitive detriments.

7. National Access Regime

Nationally significant infrastructure will only be able to be declared as “open access” if access would substantially increase competition, if it were not economically feasible for anyone to develop another facility and if access promoted the public interest.

What will this mean?

Higher threshold for declaration of facilities as “open access”.

Fewer applications for access.

Conclusion

The Final Report contains numerous other recommendations in the areas of human services, road and marine transport, taxis, retail trading hours, pharmacy ownership and location and the ACCC’s role.

Compare jurisdictions: Merger Control

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